The future of NFTs in the fashion industry…

Non-fungible tokens (NFTs) are a type of digital asset that is unique and cannot be exchanged for other tokens or assets on a one-to-one basis. In the fashion industry, NFTs are being used in a variety of ways to create new revenue streams, enhance customer engagement, and provide traceability and authenticity for products.

 One of the main categories of fashion NFTs is Hybrid Products, which combine physical and digital products into a single NFT token. This allows customers to trade the product online as an NFT before claiming its physical counterpart. Digital Collectibles, on the other hand, function as membership cards that offer holders exclusive experiences and products, helping brands to build a loyal community and increase their exposure.

 Another category of fashion NFTs is PFP Derivatives, which allow customers to customize their profile pictures as NFTs for a fee. This provides additional customization options and can help to create a more personal connection with customers. Finally, Metaverse Fashion Products are digital-only products that focus on creating 3D apparel, avatars, display rooms, and AR filters that are interactive in the metaverse.

 Overall, NFTs are changing the way that fashion brands and customers interact with each other. They provide new revenue streams, enhance customer engagement, and provide traceability and authenticity for products. The core values of fashion NFTs include tradability, authenticity, exclusivity, community, identity, and interactivity.

The importance of fashion and our digital self

Digital avatars are digital representations of individuals that are used in various online platforms and virtual environments. These avatars allow people to interact with others and with virtual content in a way that is similar to their real-world interactions. The use of digital avatars is growing in popularity as people spend more time online, and it is likely that they will become even more important as the metaverse becomes more prevalent.

As Fred Ehrsam (co-founder of Coinbase) stated, digital avatars will become the primary way that people are seen and recognized in the metaverse. This means that people will want to customize their avatars to reflect their personal style and identity. Digital fashion products, such as virtual clothing and accessories, will be in high demand as people look to express themselves through their digital avatars.

Digital fashion is an emerging industry that is already starting to gain traction. As the use of digital avatars becomes more widespread, it is likely that the demand for digital fashion products will increase, and the industry will continue to grow and evolve.

In addition to the practical benefits of digital fashion products, they also offer unique opportunities for self-expression and creativity. With digital fashion, consumers can easily and quickly change their appearance, try out new styles, and create unique looks that would be difficult or impossible with physical clothing. This allows for a level of personalization and customization that is not possible with traditional fashion products.

Furthermore, digital fashion can be a more sustainable option than physical fashion. Digital products do not require the production and transportation of physical goods, which can have a significant environmental impact. This can be especially important for luxury fashion goods, which often have a high environmental cost due to their use of exotic materials and labor-intensive production processes.

Overall, digital fashion products offer a range of benefits that make them an attractive alternative to traditional fashion goods. From practical considerations like storage and wear-and-tear, to the potential for self-expression and sustainability, digital fashion has the potential to reshape the fashion industry in significant ways.

Hybrid NFT products are fashion products that combine a physical element with a digital one. For example, a fashion company may produce a physical garment that is accompanied by a digital NFT that unlocks exclusive virtual content, such as virtual try-on experiences or virtual accessories. This allows the company to offer consumers a more immersive and interactive experience, while also providing a unique and valuable digital collectible.

Digital-Only NFT Products

Digital-only NFT products are fashion products that exist entirely in the digital realm. These products may include virtual clothing, accessories, and other fashion items that can be used to create and customize digital avatars. Digital-only NFT products can be traded, sold, and collected in the same way as physical fashion products, but without the need for physical production or storage.

NFT-Powered Digital Experiences

NFT-powered digital experiences are fashion-related digital experiences that are enhanced by NFTs. For example, a fashion company may create a virtual fashion show that allows users to interact with the models and the clothing in real-time, with NFTs providing unique access and customization options. This type of experience can be a powerful tool for engaging and retaining customers, as it offers a unique and immersive experience that is not possible with traditional fashion products.

NFT-Powered Physical Experiences

NFT-powered physical experiences are fashion-related physical experiences that are enhanced by NFTs. For example, a fashion company may create a physical pop-up shop that allows customers to try on and purchase physical clothing, with NFTs providing access to exclusive virtual content and experiences. This can be a powerful way to bridge the gap between the physical and digital worlds and offer customers a more engaging and personalized experience.

Branded NFT Collectibles

NFTs, or non-fungible tokens, are a type of digital asset that is unique and cannot be replicated or exchanged for another asset on a one-to-one basis. They are often used in the world of fashion and collectibles as a way to create digital versions of physical items, such as membership cards or limited edition clothing.

Fashion brands are using NFTs as a marketing tool to acquire new customers and establish their brand presence in the Web3 space. By releasing NFT collectibles, fashion brands can create a sense of exclusivity and community for their holders. These collectibles often come with exclusive physical and digital products, airdrops, and experiences, which can help to drive engagement and loyalty among customers.

Some noteworthy digital collectibles in this space are made by Bathing Ape, Adidas, and Adam bomb. These collectibles likely have similar utilities and are designed to create a sense of exclusivity and community among their holders. By offering unique and limited edition NFT collectibles, fashion brands can differentiate themselves from competitors and create a sense of community among their customers.

NFT Derivatives/Re-skins

NFT derivatives, also known as NFT re-skins, are a type of digital asset that is derived from an existing NFT. They are created by modifying the original NFT in some way, such as by changing its appearance or adding new features.

NFT derivatives can be useful for a variety of purposes. For example, an artist may create a derivative of an existing NFT in order to offer a new version of their work to collectors. Or, a game developer may create a derivative of a popular in-game item in order to offer a new version of the item to players.

However, the creation of NFT derivatives can also raise legal and ethical concerns. In some cases, the creator of the original NFT may not have given permission for their work to be modified in this way, and may not be compensated for the derivative version. Additionally, the use of NFT derivatives can create confusion among consumers, who may not be able to easily tell the difference between the original NFT and the derivative version.

Overall, while NFT derivatives can offer new opportunities for creators and users, it is important to carefully consider the legal and ethical implications of their use.

Metaverse Fashion

Metaverse fashion products are digital-only products that are designed to be used virtually, typically in online video games or virtual reality environments. These products are created using 3D modeling and rendering software, and can include virtual clothing and accessories, avatar models, and other digital assets.

 One key advantage of metaverse fashion products is that they allow users to quickly and easily access the latest fashion trends, without the need to purchase physical products. This can be especially appealing to younger consumers who are increasingly spending time in virtual environments, and who may not have the financial means to buy physical fashion items.

 Another benefit of metaverse fashion products is that they are not subject to the same constraints as physical fashion items. For example, designers can create an unlimited number of digital products without worrying about manufacturing or distribution costs. This can allow for greater creativity and experimentation, and can also make it easier for designers to offer exclusive or limited edition products.

Overall, the growth of the metaverse and the increasing popularity of virtual experiences are creating new opportunities for fashion brands to create and sell digital-only products. These products can offer unique and engaging experiences for consumers, and can also help brands to reach new audiences and drive engagement in the digital space.

Communication Channels

Advertising in the Web3 space, which refers to the decentralized internet and its associated technologies, can be a valuable tool for marketers. This is due in part to the popularity of social media platforms such as Discord and Twitter, which are widely used by Web3 projects and their communities.

Twitter in particular has been a popular communications platform for Web3 projects, and can be an effective way for brands to reach potential customers and build buzz around their products. For example, clothing brand Lacoste saw a significant increase in its Twitter follower count after announcing plans to launch an NFT collectible. This demonstrates the level of attention that clothing brands can receive if they announce plans to launch NFTs, as many people are interested in buying these collectibles for the NFT itself, regardless of the brand.

Overall, channels of communication such as Twitter and programmatic advertising can be an effective way for brands to reach potential customers and build buzz around their products in the Web3 space. By leveraging the popularity of these platforms, marketers can effectively promote their products and reach new audiences.

Wallet Addresses

One advantage of marketing in the Web3 space is that marketers have access to the public wallet addresses of their NFT holders. Because all information is available on the blockchain, marketers can use this information to gain insights into the preferences, spending patterns, and consumption levels of their customers.

Tools such as Etherscan can be used to analyze users' wallet transactions history, token holdings, and Dapp usage, allowing marketers to target their campaigns to specific audiences. For example, marketers may use this information to select wallets that have transaction histories from a specific time period, in order to target a campaign at early supporters of the brand.

Overall, the availability of public wallet addresses in the Web3 space can provide valuable insights for marketers, allowing them to better understand their customers and target their campaigns more effectively. This can help to drive engagement and loyalty among customers, and can ultimately lead to greater success for the brand.

Airdrops

Wallet addresses function similarly to email addresses that are open to everyone. Instead of giving out emails, SMS messages and even flyers, brands can simply airdrop promotional NFTs directly into your ETH address to promote their collection. Figure 9 shows examples of promotional airdrops, which were sent to wallet addresses of those who held similar categories of NFTs. Links and further details can be found in the description sections of these NFTs.

Profit First Revenue Model

The "Profit First, Deliver Later" revenue model is commonly used by Web3 projects, including NFT fashion projects. This model involves raising funds by releasing NFTs before building and delivering the project, allowing brands to sell digital products with completed designs and then worry about the production process later.

One benefit of this model is that it allows brands to accurately manage their supply and avoid unnecessary inventory costs. By predetermined the total supply of products during public minting, brands can create exclusivity and generate demand among consumers. This is particularly effective in the NFT space, where the idea of owning one out of a limited number of products can be persuasive for buyers.

For example, the sale of the first virtual sneakers collection from RTFKT raised $3.1 million in just seven minutes, despite the fact that the physical products and AR filters related to the sneakers were unfinished at the time of minting. This demonstrates the power of exclusivity and FOMO (fear of missing out) in driving demand for NFTs.

Overall, the "Profit First, Deliver Later" revenue model can be an effective way for NFT fashion projects to raise funds and manage their supply, while also creating exclusivity and generating demand among consumers.

Currently, most NFT fashion projects are sold in ETH, which can lead to large variations in their sale revenues due to fluctuations in the value of ETH against the US dollar. For example, the Adam bomb NFT collectible was released when ETH was priced at around $3,000, which resulted in its revenue per unit being double that of the Lacoste NFT collectibles, which were released when ETH was priced at around $1,200.

One of the most popular categories of fashion products that brands are releasing as NFTs is digital collectibles. These collectibles act as membership passes, granting holders exclusive access to products and experiences. They are popular because they come in the form of collectibles such as figurines or generative PFPs, which require less effort in terms of design and rendering compared to other types of fashion products.

Overall, the use of ETH as the primary currency for NFT fashion projects can result in significant variations in their sale revenues, due to fluctuations in the value of ETH. However, the popularity of digital collectibles as a product category has allowed brands to easily create and sell NFTs, leading to their growing popularity in the fashion industry.

Secondary Resale, Authenticity and Traceability

Digital X physical hybrid products in the form of NFTs offer luxury brands and designers the opportunity to earn royalties from secondary re-sales using smart contracts. This is different from traditional fashion products, where brands and designers only make revenue from the initial sale. NFTs allow producers to also benefit from the secondary resale market, generating additional revenue from the resale of their products.

One successful example of a hybrid NFT product is the FEWO sneakers collection, which was sold out in just seven minutes for $3.1 million. Each NFT sneakers allowed the owner to claim one physical version of the sneaker, and owners were able to trade their NFTs freely on NFT marketplaces at a 10% creator's fee. This has generated 480 ETH for RTFKT in secondary sales to date.

Overall, the use of NFTs to create digital X physical hybrid products offers luxury brands and designers a new way to earn revenue from their products. By allowing for the perpetual resale of their products, NFTs can help to generate additional revenue from the secondary market, while also providing owners with the ability to trade their NFTs freely.

The secondary resale value of NFT fashion products offers a more accurate valuation of highly desired products. For example, luxury brands such as Rolex and Hermes often have products that are sold out and under-priced in the primary market. Popular models of Rolex have a mark-up price of more than 100% in the secondary market. If these watches were sold in the form of hybrid NFTs, each transaction would generate royalties of 5-10% for Rolex and its watch designers.

NFT holders would also benefit from the liquidity and price transparency of the NFT marketplaces, allowing them to more easily sell or trade their NFTs for a fair market value. The global second-hand apparel resale market is estimated to be worth $96 billion in 2021, highlighting the potential for hybrid NFT apparel products to capture a significant share of this market.

Overall, the secondary resale value of NFT fashion products offers a more accurate valuation of highly desired products, and can generate additional revenue for luxury brands and designers. It also provides benefits for NFT holders, such as increased liquidity and price transparency in the market.

In addition to the potential for higher valuations and additional revenue, NFTs also offer traceability and authenticity that can protect both buyers and sellers in the secondary marketplace. Fake luxury goods account for 60% of the $4.5 trillion global trade in counterfeit goods in 2019, according to the Harvard Business Review.

A survey by Vogue found that luxury consumers find resale services and the digital traceability of products offered directly by the brand to be the most exciting innovations they are looking forward to. NFTs can provide this traceability by using token ID identification and smart contracts to guarantee the authenticity of a product.

Overall, the traceability and authenticity of NFT fashion products can provide significant benefits for both buyers and sellers in the secondary market. It can help to protect consumers from purchasing fake goods, and can also help to increase the trust and confidence of buyers in the market. This can ultimately lead to greater success for luxury brands and designers, as well as for the broader NFT fashion market.

In the future, digital fashion outfits will have information on interoperability and property traits, similar to the "size chart" and "material" labels on physical clothing. The interoperability label will contain information about the list of metaverses and games that support the NFT, allowing avatars to use items with high interoperability across various metaverses and games. The properties label will contain information about the list of traits the NFT has, as well as their rarity.

Overall, the interoperability and properties labels on digital fashion outfits will provide important information to consumers, allowing them to make informed decisions about their purchases and use of the NFTs. This will help to ensure that NFT fashion items are as functional and useful as possible, and will help to drive the growth and success of the NFT fashion market.

The intellectual property (IP) rights related to fashion NFTs may be complicated for consumers to understand, and there is a need for simplification. Similar to washing labels on physical clothing, IP rights labels on NFTs should clearly indicate what users can and cannot do with the NFT. Developing universal symbols and language to explain IP rights in the fashion industry could help to inform consumers and make it easier for them to understand their rights and responsibilities.

Currently, the IP rights associated with NFTs are often written in complicated legal language and hidden in lengthy legal documents, which can be confusing and time-consuming for the average consumer to understand. For example, RTFKT grants Clone X Avatars NFT holders a "limited, personal, non-exclusive, worldwide" commercial license, but this license does not apply to avatars with traits created by Murakami.

Overall, there is a need for greater clarity and simplicity in the IP rights associated with fashion NFTs. Developing universal symbols and language to explain these rights could help to make the NFT fashion market more accessible and user-friendly for consumers.

Change in Community Engagement and Membership Management

NFTs can function as a social token that helps consumers of fashion brands to easily connect with each other through holders-only Discord groups or communities. This can give consumers financial incentives to become brand ambassadors and actively engage with the brand's community.

NFTs also change the membership and loyalty programs of fashion brands. Traditional fashion brands like 

Bathing Ape and Adam Bomb offer NFT collectibles that function like a membership card or pass, unlocking exclusive experiences and benefits for holders. For example, owning a Bathing Ape NFT might grant access to free exclusive merchandise, reward programs, airdrops, and even holder-exclusive stores. Adam Bomb NFT holders, on the other hand, might benefit from holders-only events, T-shirts, and faster checkout at warehouse sales. These exclusive perks and benefits can encourage NFT holders to stay engaged with the brand in the long term.

Shopify has also entered the NFT space with the launch of token-gated storefronts for NFT communities. These storefronts allow token holders to connect their wallets and gain access to exclusive shopping experiences, discounts, and merchandise. This type of token-gated e-commerce can help to better reward member loyalty and highlight the importance of NFT holders to a brand. In addition, Shopify is embedding storefronts inside Twitter community pages, allowing products to be directly displayed on profile pages and bringing communities closer to their favorite brands' online storefronts.

In conclusion, the use of NFTs in fashion products has the potential to revolutionize the fashion industry by providing a new and unique way for consumers to express themselves and interact with their digital apparel. NFTs also offer benefits to fashion brands, such as the ability to earn royalties from secondary re-sales, provide traceability and authenticity, and create exclusive experiences for their customers. As the technology continues to evolve, we can expect to see more fashion brands and designers experimenting with NFTs and incorporating them into their products and business models.